Analysing the impact of COVID-19 trade disruptions on port authority pricing and container shipping in South Africa

Abstract

Background: The coronavirus disease 2019 (COVID-19) pandemic directly affected the shipping industry globally, and South Africa experienced decreased cargo volumes and increased freight rates. In addition, National Ports Authority (NPA) charges are 69% and cargo dues 166% above the global benchmark mean. The NPA uses a rate of return (RR) model to calculate tariff increases that are contested by port stakeholders.

Objectives: The study aimed to analyse the impact of COVID-19 trade disruptions and examine the associated higher liner freight rates, tariff applications for higher NPA tariffs and reduced investment in port infrastructure. It showed that adjusting the RR model variables can result in reduced tariffs and large cost savings for port users.

Method: This study analysed the impact of the pandemic on South Africa’s cargo volumes and freight rates. It critiqued the regulatory asset base, the asset beta, and the tax rate to be applied and calculated the adjustments to these RR model variables using five scenarios for FY2022/2023.

Results: The results show a sharp decrease in cargo volumes during COVID-19 lockdowns, and a parallel increase in freight rates. The five-scenario results show how the NPA tariffs could be much lower, calculating a tariff decrease of 5.7% in scenario 4 and a 20% decrease in scenario 5.

Conclusion: Amid the global rise of shipping rates and the economic impact of the pandemic on South Africa’s trade, the results show that there is a potential to enhance South Africa’s trade competitiveness through a decrease in NPA-weighted average tariff by 20%.